Leverage pricing psychology to supercharge your PROFIT – NOW!
There’s a lot of psychology when selling.
Your customers are influenced when you present your price and the context around your pricing.
Simple shifts in how you price and present can make a major difference in your profits. To effectively use pricing psychology, you need to understand the following:
You must understand your audience AND their expectations.
Knowing your target audience's demographics, preferences, and buying behavior is insufficient.
Different groups might respond differently to pricing strategies. You could be selling the same product to audiences with different expectations.
Is what you're selling necessary to your audience, or do they consider this a splurge? Within your own offerings, you may be serving different audiences.
Your product or service must align with your customer value perception.
Do your buyers feel that your price is in line with their expectations? Does your buyer understand the value of what you're selling?
Psychological pricing won't be effective if the consumer doesn't see the value of your product or service.
Are you using competitors as reference points?
If your customers know a product typically retails for $50 and you offer it for $40, they'll see it as a good deal.
However, the psychological impact is lost if they're unaware of standard or competitive pricing.
You must build trust in your brand.
No matter how you present your prices, consumers are unlikely to buy if they don't trust your brand or feel manipulated.
While psychological pricing can be effective, it should be used ethically.
Manipulative tactics can harm your company's brand and reputation in the long run. No one wants to feel like they "fell for a trick."
Pro tip: Be transparent about costs. Avoid hidden fees or conditions – especially when they are presented late in the sale or on the checkout page. Be upfront about the total cost to avoid cart abandonment and losing a sale.
Certain words can subtly influence your customer’s perception of your price.
How you present the price (and accompanying options) can steer customers to the product you want to sell.
Only: Here’s a straightforward experiment. Try using the word “only” when talking about price.
Psychologically, by putting “only” in front of the price, you make the price seem smaller or more valuable, implying that the price is a good deal.
Was/Now: Demonstrate the discount. “Was $600, now $450.” To amp this further, use the “End Prices with 9” strategy and make your price $459.
Or try the “odd price” strategy and price it at $453, which sends the message that you have cut your price to the bone.
Anchoring your price can change the cost perception
You can make the price of a product seem relatively cheap by comparing two products side by side. Your $2000 watch seems like a bargain compared to a $12,000 watch.
If you have three products, most people will choose the middle option.
If you have $20, $50, and $80 options, the $50 option will almost certainly outsell the others.
Most people look for context when they buy. Price anchoring gives them a range and helps them feel more confident about their choice.
Pro tip: Define your price anchors as “Good,” “Better,” and “Best.” Use whatever makes sense: “Most Savings,” “Best Value,” “Most Popular,”#1 Choice for Small Business,” or something similar. This price anchoring gives people a pricing gauge and subtly introduces social proof.
Price simply
Which of these three prices seems cheaper?
A) $1,599.99
B) $1,599
C) $1599
Yes, they are all the same, but now, read them out loud.
A) One thousand five hundred and ninety-nine dollars and ninety-nine cents.
B) One thousand five hundred and ninety-nine dollars.
C) Fifteen ninety-nine.
Now, which one feels the cheapest?
If you said c) Fifteen ninety-nine, you’re not alone. Most people will read that last price without the “thousand,” “hundred,” or even “dollars.”
Pro tip: Weirdly, even commas and decimal points can be trip hazards in your pricing. Whenever possible, keep your prices written out as simply as possible, eliminating the distraction of commas and decimal points.
Present your product as the luxury choice, and you can charge luxury prices using premium or prestige pricing.
If you sell a premium product or exclusive service, consider using Premium or Prestige Pricing.
Think about people who will only wear Rolex watches or buy their clothes at Chanel. These brands have spent decades developing a devoted following for their superior products.
How can you differentiate your product or service as a luxury choice rather than a sell-on-price commodity?
Could you change your presentation or packaging? Up the luxe level? Curate what you sell.
Making the switch to being perceived as a luxury product takes work.
You will need high brand awareness, intense customer loyalty, and an innovative or superior product or service. People will pay almost any price to acquire what you are selling. You may also use the "limited supply" tactic if you sell something that is genuinely scarce,
Price in context
Which haircut would you expect to pay more for?
A) A haircut at a fancy salon that greets you with lemon water and massage chairs
B) A haircut at a place with ripped seats and smells faintly of disinfectant?
The results may be the same, but experience and advertising condition you to pay more for the “nicer” experience.
Perception about your product or service is a big part of the sales and marketing process.
Context matters. Is your packaging luxurious or a plain brown bag? Does your store feel high-end or like a discount chain store? How can you improve your presentation (so you can raise your prices)?
FOMO pricing
Fear of Missing Out (FOMO) is also a pricing strategy that can be very effective.
You can create limited-time offers, limited stock availability, or exclusive access, such as early-bird or invitation-only pricing.
The key is to create a genuine sense of scarcity without creating distrust.
Give a real reason for the FOMO pricing. Are you discontinuing a product? Was it a limited-edition product? Are you "retiring" a popular option or product? The fashion and toy industries do things like this all the time. How can you apply some of their strategies?
Here's what you need to avoid with FOMO or scarcity pricing.
Don't be the business that runs “going out of business” sales for months or years. After a very short time, no one trusts that they are really going out of business, and any trust they have around low prices is gone.
"This just costs $1 a day" – using temporal pricing
If you can break down prices over time for more significant purchases, the higher price can feel less of an obstacle. For instance, "$1 a day" seems more manageable than "$365 a year," even though they're the same.
This can also be a very effective strategy when trying to upsell or bundle products or services.
If your basic product or service costs $500 and your upgraded package is $1000, focus on the $1.37 a day difference to get all the additional things in the upgrade.
"Just four easy payments of $99" – payment options and flexible pricing
If you offer a high-end product or service, offering a variety of payment methods and terms can psychologically reduce the pain of paying.
You could offer quarterly installment payments or a monthly payment plan. Installment payments can make a product seem more affordable.
Here’s an example of how a business might frame its price using several of pricing triggers.
Let’s say you want to add a stone retaining wall to your house and have budgeted $8,000.
Scenario 1: Contractor A comes out and quotes $10,000. That’s more than you budgeted. You talk with him about your budget, but he’s firm on the price. Thank him, and call the next guy on your list for a quote.
Scenario 2: Contractor B says, ”Normally, a wall like this runs about $16,000 to $18,000” (setting the top-end price beyond your budget).
Then he says, “I had a job that got rescheduled. I already bought the stock. If you’re willing to use this stone, I can do the wall for $10,000. I just want to keep my guys busy."
Contractor B has used two pricing strategies: FOMO and price anchoring.
He's telling you it's a one-time offer; his regular price would be $16,000-$18,000 for this job. And he’s also given you a logical reason for offering this discount – a rescheduled job, and he wants to keep his crew busy.
Yes, it’s more than you budgeted.
But by using FOMO and price anchoring, you believe you’re getting a better value (and nicer wall) at about half the regular price.
Even though it’s more than you budgeted, this price and opportunity look too good to pass up.
There is a lot of psychology around selling.
How you present the price, the overall perception of your brand, and which other brands the customer may also be considering are all a part of the buying decision.
It’s all about knowing your audience's expectations, framing your customers' perceptions, and then matching the prices they can expect.
Take action. Download the worksheet.
This is from Profit-ize Your Business Book Three: Pricing and Affiliate Marketing.
Like this post? It was taken from the Profitize Your Business series
